MARKET WRAPS

Watch For:

New Commercial Vehicle Registrations in Europe statistics; EU Business & Consumer Surveys; ECB interest rate announcement. Updates from Sanofi, Beiersdorf, Lloyds Banking Group, WPP, DS Smith, Volkswagen, TotalEnergies.

Opening Call:

European stocks could struggle for momentum early Thursday ahead of the ECB meeting. Dollar flat, Yen strengthens as concerns over Covid-19 infections in Asia rise. 10-year U.S. Treasury yields fall. Oil falls and gold inches lower.

Equities:

European stocks are set to waver at the open Thursday as investors await the European Central Bank policy meeting later.

President Christine Lagarde and most of the rest of the ECB are still in the inflation is transitory camp, at least for now. Of course, inflation isn't quite as red hot in the eurozone as it is in the U.S., with consumer prices up 3.4% year-over-year in September, compared to 5.4% in the U.S., but it still faster than what the ECB had said as recently as last month.

The bond market has reacted, pushing yields higher. A combination of surging energy prices and a solid rollout of vaccinations after a slow start is putting pressure on ECB policymakers.

"The question for the upcoming policy decision is just what the Governing Council and President Lagarde say or do to push back," said James Rossiter, head of global macro strategy at TD Securities. Already, there's been some pushback, with the ECB's chief economist, Philip Lane, saying "it's challenging to reconcile some of the market views with our pretty clear, straightforward forward guidance."

Elsewhere, U.S. stocks fell in choppy trading Wednesday, retreating from records set just the previous day.

Investors say that, overall, corporate earnings have reassured them that companies have been able to take issues like supply-chain problems, inflation and a slowdown in Chinese economic growth in stride. Despite Wednesday's pullback, the S&P 500 remains on course for its biggest monthly advance since November.

"Investors got fairly gloomy in September, clearly against the backdrop of all sorts of macro concerns," said Paul O'Connor, head of the multiasset team at Janus Henderson Investors. "The broader story from results is that companies are managing these dynamics pretty well, and also managing expectations fairly well."

Money managers still have worries, ranging from the fate of President Biden's infrastructure and social-spending plans to the potential unwind of Federal Reserve stimulus measures that have boosted markets since early 2020. In the latest sign the economy slowed in the third quarter, data out Wednesday showed durable goods orders fell 0.4% in September from August.

Stocks to watch: Banking stocks dropped after the U.K. budget statement, which didn't offer many surprises over and above details leaked beforehand, GAM Investments said.

Finance minister Rishi Sunak announced plans to cut an 8% surcharge on bank profits over GBP25 million to 3% from April 2023. "It was hoped that the banking surcharge was going to be cut, but Sunak has retained the 3% levy, so banking stocks are the biggest loser from today's budget, " GAM Investment Director Charles Hepworth said.

Barclays, HSBC and NatWest Group dropped and other financial stocks also lost ground. "U.K. equities still remain a pretty unloved regional play for global investors. The scarring of Brexit is still a haunting concern for many," Hepworth said.

Forex:

The dollar was flat in early Asia trade following data Wednesday showing U.S. durable-goods orders fell for the first time since April. "Today's figures, while emanating from the manufacturing sector, highlight ongoing themes of rising inflation in a broader sense," Cambridge Global Payments currency analyst Matthew Eidinger said.

He added that with currency markets awaiting the first read on 3Q US GDP and September consumer inflation later this week, movement in currency markets is becoming more muted. "These two data points will be viewed as the most up to date pulse on the American economy and consumer pricing trends" ahead of the FOMC meeting in early November, at which the Fed "likely decides to reduce monetary stimulus measures."

JPY strengthened against other G-10 and Asian currencies, as concerns over surges of Covid-19 infections in Asia boost the haven appeal of the yen. Focus in Asia may be on the continuing Covid-19 risks in China, with infections in Beijing at an eight-month high, IG said.

Also, Singapore had an "unusually" high number of more than 5,000 new cases Wednesday, IG said, noting comments from the Ministry of Health.

Sterling stayed weaker after U.K. Treasury chief Rishi Sunak unveiled his latest budget statement on Wednesday. "The Chancellor is moving away from big deficits and toward fiscal discipline at a time when U.K. GDP remains below its pre-pandemic trend," HSBC Asset Management analyst James Antwis said.

The budget should provide the Bank of England with "food for thought" before its November 4 policy meeting and throws doubt over whether the central bank can raise interest rates as quickly as the market expects since the combination of higher rates and premature fiscal tightening would jeopardise the recovery, he said.

Bonds:

Investors continued to buy gilts during the U.K.'s government's budget, pushing yields lower, suggesting they interpreted a less positive outlook for the U.K. economy, said Oliver Blackbourn, portfolio manager at Janus Henderson.

"Investors appeared to see little to buoy the longer-term U.K. economic outlook as yields slipped lower during the speech and the curve flattened markedly," he said, stressing that the move lower in the U.K. gilt market was far more pronounced than the decline in global yields. This highlights investor concerns about both inflation running well-above the central bank's 2% target and the future fiscal drag on growth as spending falls, he said.

Treasury yields were mostly lower Wednesday. The 10-year benchmark has been hovering around 1.6% for most of this month as investors brace for tapering and move forward their estimates for rate increases while inflation proves more resilient than initially expected.

Higher inflation "is no longer just being driven by a handful of one-off factors," Capital Economics said, noting that traveling costs are no longer suppressed by the Delta variant and could increase October CPI data. "The pick-up in both survey and market-based measures of inflation expectations is an additional concern."

Energy:

Oil declines in early Asian trade, following U.S. government data showing a rise in domestic crude inventories. Further supply could be coming from Iran, as the resumption of nuclear talks between the country and the EU suggests the possibility that it will soon be able to export crude oil again, CBA said.

Metals:

Gold inched lower in early Asian trade, pulling back after getting some support overnight from weakness in USD and a retreat in U.S. Treasury yields. The precious metal seems to be struggling to maintain gains above $1,800.00, Oanda said, adding that investors will likely turn their attention to next week's FOMC meeting for now. "It is almost certain that a start to the Fed taper will be announced," Oanda said.

Iron ore prices were sharply lower in Asian trading, as the commodity retreats from days of gains earlier this week and recent data showing higher production output also weighed. Huatai Futures said Chinese officials' push to ease a surge in commodity prices could further expand supply in the near term.

However, in the longer run, Huatai expects rangebound trading in the commodity, pointing to limitations for the commodity's price upside and downside.

TODAY'S TOP HEADLINES

BOJ Lowers Outlook for Japan Growth, Inflation

TOKYO-The Bank of Japan lowered its growth forecast, reflecting supply-chain constraints that have weighed on exports and production, and said it didn't see significant inflation coming.

In its quarterly outlook report released Thursday, the bank's policy board projected the Japanese economy would expand 3.4% in the current fiscal year ending March 2022, compared with its previous projection of 3.8% released in July. It said it expects 2.9% growth in the year ending March 2023, up from a previous projection of 2.7% growth.

Iran to Return to Nuclear Deal Talks in Vienna Next Month

Iran will return to nuclear talks before the end of November, its chief negotiator said Wednesday, restoring the Biden administration's hopes that it can revive the 2015 nuclear deal.

Iran's return to the negotiations would end a five-month hiatus in talks that has enabled Tehran's new hardline government to press ahead with its nuclear program.

Democrats Drop Paid Leave From $1.75 Trillion Proposal

WASHINGTON-Democrats abandoned plans to include a paid-leave program in their social spending and climate bill, according to people familiar with the talks, while prospects for a billionaires' levy to help fund the package faded and a potential surtax on wealthy Americans' income gained traction.

The White House is pushing for Democrats to come together around the bill, expected to cost around $1.75 trillion, by the end of the week, which could also unlock possible passage of a parallel bipartisan infrastructure package that has been held up by progressives in the House. President Biden is set to attend the Glasgow climate conference next week, and the Virginia and New Jersey gubernatorial elections end Tuesday, making the White House eager to show progress on his agenda.

SEC Won't Approve Leveraged Bitcoin Fund

The Securities and Exchange Commission asked at least one asset manager not to proceed with plans for a leveraged bitcoin exchange-traded fund, according to a person familiar with the matter.

The SEC indicated it wants to limit new bitcoin-related products to those that provide unleveraged exposure to bitcoin futures contracts, such as the ProShares Bitcoin Strategy ETF, which was launched last week, the person said.

CFTC Chief Says Recent Crypto Cases Are 'Tip of the Iceberg'

WASHINGTON-The acting head of the Commodity Futures Trading Commission said Wednesday that he plans to continue aggressively policing cryptocurrency markets and called on Congress to consider expanding his agency's authority to do so.

Rostin Behnam, the CFTC's acting chairman, noted that the agency has settled two enforcement actions against cryptocurrency companies totaling $140 million. "But this is the tip of the iceberg," he said in a confirmation hearing before the Senate Agriculture Committee.

U.K., Canada Lead West in Weaning Economies Off Covid-19 Pandemic Support

LONDON-The U.K. dialed back government stimulus for the fast growing British economy, one of the first big Western economies to step away from the emergency policies put in place to tackle the coronavirus pandemic as concerns over inflation intensify.

Treasury chief Rishi Sunak set new tax and spending policies that together with faster growth are forecast to shrink the U.K.'s budget deficit significantly over the next few years, putting the U.K. in the vanguard of countries reducing fiscal support for their economies as the strong but fitful recovery from the pandemic continues.

U.K. Audit Regulator Says Companies Need to Improve Disclosure on Revenue, Cash Flows

The U.K. audit and accounting regulator said it questioned nearly 100 companies about their reporting in areas including revenue and cash flows and asked 15 of them to restate their accounts as part of an annual review of financial filings.

The Financial Reporting Council on Wednesday said it reviewed the annual reports of 246 British companies, about 39% of which it reached out to for additional information. The percentage is down from the previous year, when the FRC questioned roughly 44% of 216 businesses whose reports it analyzed.

More Travelers Are Heading to Europe in 2022 After the Pandemic Sank Vacation Plans

More travelers are starting to think big about vacations again.

After a long stretch of mainly short-term travel planning, inquiries are picking up for trips well into 2022, according to data from hotels and travel-industry analysts. The booking rates are starting to trend closer to pre-pandemic levels, analysts say.

GlaxoSmithKline Earnings Beat Expectations. The Embattled CEO Says Her Plan Is Working.

Amid an assault from activist investors, GlaxoSmithKline CEO Emma Walmsley announced third-quarter financial results that she said show the company is on the right track.

"I am delighted to announce a quarter of strong financial performance, which shows the actions being taken over the past few years really paying off," Walmsley said on a media call early Wednesday.

Third Point Has Big Shell Stake, Urges Energy Giant to Break Up

Daniel Loeb's Third Point LLC has taken a large stake in Royal Dutch Shell PLC and is urging the oil giant to separate into two companies to retain and attract investors as many flee stocks seen as environmentally unfriendly.

The activist is the latest to pressure a major oil company to change its strategic direction, as the firms face calls to reduce fossil fuel investments and pivot to renewable energy amid concerns about climate change. Upstart hedge fund Engine No. 1 waged a successful campaign to win seats on the board of Exxon Mobil Corp. in May.

Samsung Posts Record Quarterly Revenue From Chip Boom

SEOUL-Samsung Electronics Co. reported record quarterly revenue and saw net profit grow 31% on the back of booming demand for memory chips, though some growth may soon slow as the global component shortage stalls the assembly of various tech products.

The Suwon, South Korea, company posted a third-quarter net profit of 12.29 trillion won, or the equivalent of $10.5 billion, versus 9.36 trillion won a year earlier.

Why Apple's Privacy Changes Hurt Snap and Facebook but Benefited Google

Apple Inc.'s recent privacy crackdown has affected the largest players in online advertising very differently, recent quarterly results show, underscoring the strengths and weaknesses of each tech giant's ad business.

Alphabet Inc.'s Google, the world's largest digital-ad company by revenue, tallied its highest sales growth in more than a decade in the third quarter, while Facebook Inc. and Snap Inc. came up short of expectations and blamed Apple's privacy rules for the slowdown.

Profit Falls at GM and Ford as Chip Shortage Takes Toll

The two largest U.S. auto makers reported steep drops in third-quarter profit as the computer-chip shortage dented factory output, and each said the problem would leave dealership lots nearly bare well into 2022.

Executives from General Motors Co. and rival Ford Motor Co. said the supply-chain disruptions should slowly improve in the fourth quarter and throughout next year, although strong car demand will make it difficult to restock dealership lots.

Hertz Links Up With Uber to Offer 50,000 Tesla Rentals

Hertz Global Holdings Inc. said Wednesday it is linking up with Uber Technologies Inc. to make 50,000 Teslas available in Uber's ride-sharing network by 2023, the latest in the rental-car company's efforts to build momentum postbankruptcy.

The deal comes days after Hertz, which collapsed into bankruptcy at the start of the Covid-19 pandemic last year, said it is making a significant investment in an EV rental fleet, including an initial order of 100,000 Teslas by the end of 2022 and new EV-charging infrastructure across the globe. The company exited Chapter 11 in June and has a stock listing planned for this year.

Write to sarka.halas@wsj.com

Expected Major Events for Thursday

04:30/NED: Oct Producer confidence survey

06:00/NOR: 3Q Labour force survey

06:00/NOR: Aug Labour force survey SA, incl unemployment

06:00/EU: Sep New Commercial Vehicle Registrations in Europe statistics (EU27 + EFTA3)

06:00/NOR: Sep Retail Sales

06:00/DEN: Oct Business tendency survey

07:00/SPN: 3Q Economically Active Population Survey

07:00/SWE: Oct Quarterly Business Tendency Survey

07:00/SWE: Oct Consumer Tendency Survey

07:00/SVK: Sep PPI

07:00/SVK: Oct Business tendency survey

07:00/SVK: Oct Economic sentiment indicator

07:00/HUN: Sep Employment & unemployment

07:00/SPN: Oct Flash Estimate CPI

07:30/SWE: Sep Retail sales

07:30/SWE: 3Q Flash GDP

07:55/GER: Oct Labour market statistics (incl unemployment)

08:00/ICE: Sep Labour Force Survey

08:00/GER: Oct Bavaria CPI

08:00/ITA: Oct Consumer Confidence Survey

08:00/ITA: Oct Business Confidence Survey

08:00/GER: Oct Brandenburg CPI

08:00/GER: Oct Hesse CPI

08:00/GER: Oct Baden-Wuerttemberg CPI

08:30/GER: Oct North Rhine Westphalia CPI

09:00/MLT: Sep PPI

09:00/EU: Oct Business & Consumer Surveys - Business Climate Indicator & Economic Sentiment Indicator

09:00/GER: Oct Saxony CPI

09:30/BEL: Oct CPI

10:00/ITA: Sep PPI

10:00/IRL: Sep Retail Sales Index

11:45/EU: ECB interest rate announcement

12:00/GER: Oct Provisional CPI

13:00/BEL: 3Q Preliminary GDP

23:01/UK: 3Q BRC-LDC Vacancy Monitor

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(END) Dow Jones Newswires

October 28, 2021 00:29 ET (04:29 GMT)

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